Chancellor Rachel Reeves is poised to deliver the highly anticipated Autumn Budget tomorrow, Wednesday, November 26, outlining the UK's financial plan for the coming year.
Pressure for Tax Increases
This second budget from the Labour government is shrouded in speculation, with financial experts warning that Chancellor Reeves has been advised to raise three key taxes. The influential Institute for Government states it is 'almost certain' that taxes will rise this autumn, pointing to the 'high level of government debt' and volatile market conditions as primary drivers.
The think tank's September insight paper emphasised that despite promises that the 2024 budget rises were a one-off, the current fiscal reality leaves little room for manoeuvre. The Treasury appears to be engaging in 'kite flying', testing public reaction to potential reforms, particularly around property tax.
Likely Targets for Revenue Raising
With limited time for extensive groundwork on complex reforms, the Chancellor's options are likely constrained to 'well-understood and easy to implement changes'. To raise substantial revenue, the Institute for Government suggests the most probable candidates are broad-based tax rises affecting a large portion of the population.
The most straightforward approach would be increases to the main rates of:
- VAT
- Income Tax
- National Insurance
However, such a move would come at the significant political price of undoing a Labour manifesto commitment. A more politically palatable, though less transparent, alternative would be to announce a further freeze to income tax and National Insurance thresholds, effectively pulling more people into higher tax brackets over time.
A Tax-Reforming Chancellor?
The speculation indicates that Rachel Reeves may be positioning herself not just as a tax-raising Chancellor, but as a tax-reforming one. Yet, the lack of official, open consultation on these matters suggests that for this autumn, her hands may be tied, forcing a reliance on these more immediate fiscal levers. All will be revealed when she stands at the despatch box tomorrow.
